Wrap Text
Reviewed preliminary results - year ended 31 March 2014
Peregrine Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1994/006026/06)
JSE share code: PGR ISIN: ZAE000078127
("Peregrine" or "the group")
REVIEWED PRELIMINARY RESULTS - YEAR ENDED 31 MARCH 2014
- Headline earnings per share up 52% to 211,5 cents per share
- Normalised headline earnings per share up 43% to 198,2 cents per share
- Normalised cash generated from operating activities of R456 million
- Final dividend of 100 cents per share
COMMENTARY
The Peregrine group produced a strong set of results under improved trading conditions for
the twelve months ended 31 March 2014. All operating subsidiaries performed well with
Citadel and Peregrine Securities, in particular, producing excellent results. The overall results
were characterised by an improvement in the quality of earnings, with returns on proprietary
investments, in line with the revised group strategy, accounting for a lower proportion of
profits than in previous years.
Financial results
The basic profit attributable to shareholders amounted to R425 million (2013: basic loss
R467 million following the Stenham intangible asset impairment, after non-controlling
interests, of R753 million) with the basic earnings per share amounting to 214.1 cents per share
(2013: basic loss per share of 226.4 cents per share). Headline earnings increased by 43% to
R409 million (2013: R286 million) with headline earnings per share increasing by 52% to
211.5 cents per share (2013: 138.9 cents per share).
The IFRS headline and basic earnings per share advised above do not however accurately
reflect the true economic results due to the application of IFRS 2 which requires that a share
based payment (arising in respect of 10 million Peregrine shares which were purchased by the
Citadel Share Trust to incentivise Citadel employees over a five year period) be recognised
over a vesting period of five years, rather than recognising such cost in the year under review.
Accordingly, the board of directors feels that it is more appropriate and useful, in addition to
providing the IFRS disclosed earnings, to also disclose normalised earnings as follows:
Normalised basic earnings attributable to shareholders amounted to R399 million with
normalised basic earnings amounting to 200.8 cents per share. Normalised headline earnings
amounted to R394 million with normalised headline earnings per share amounting to 198.2
cents per share.
Normalised cash generated from operating activities amounted to R456 million (2013: R157 million),
once again outstripping attributable earnings to a significant extent and highlighting
the cash generative nature of the group. A good indication of the cash profits of the
underlying businesses is that total profit before tax, capital items and non-cash items,
adjusted for total minorities, amounted to R459 million.
Aggregate cash in the group amounted to R714 million at year-end, of which R178 million
was available at the centre, R404 million held offshore and the balance of R132 million held by
local subsidiaries.
Segmental results
Substantial non-controlling interests, including Nala's shareholding in Peregrine SA
Holdings, exist in many of the group's operations. Operating results are therefore presented
before tax, reflecting amounts after non-controlling interests, before intangible amortisation
and impairment and share-based payment costs. This better reflects and aids in the understanding of
each division`s specific economic benefit to the shareholders of the group. As a result of the
restructure of the group's BEE shareholding which became effective at the end of September
2012, in which Nala acquired an effective 14% in Peregrine SA Holdings, this year's results
are not directly comparable to that of the previous year.
Wealth Management
Citadel, which celebrated its 20 year anniversary during the year, continued to capitalise on
its positioning as the leading private client wealth manager in South Africa. Assets under
management (including assets in wholly owned subsidiary Wealthcorp) increased to R30.8
billion (2013: R23.5 billion) with gross inflows for the year amounting to R2.8 billion. The
client retention rate remained in excess of 97%.
Profits for the year increased by 81% to R240 million (2013: R133 million). Pleasing
investment performance delivered positive real returns for most clients over the year,
resulting in meaningful performance fees as well as improved annuity earnings.
The profitability of the wealth management division was negatively impacted by the further
loss incurred by Beauclerc, a UK and Guernsey based multi-family office, which was sold
during the year.
Asset Management
The group's Asset Management division comprises a number of fund management
businesses. The largest contributor to the division is the group's flagship hedge fund
manager, Peregrine Capital. Despite a continued strong performance by Peregrine Capital,
profit decreased as a result of fund returns of R60 million being unable to match the
extraordinary returns of R76million in the prior year. Peregrine Capital's asset base grew to
R3.7billion by year end (2013: R3.4billion) largely as a result of its strong returns.
During the year the group acquired a 65% stake in Cannon Asset Managers. The integration
of this business into the wider group is progressing well with benefits being felt within
Cannon itself as well as other group businesses.
Stenham
During the year, in addition to buying out all the non-controlling interests in Stenham Asset
Management, further share purchase and repurchase transactions took place in the UK and
Guernsey based asset management and trust business, Stenham. As a result, Peregrine's
share in Stenham increased from 62.7% to 70.8%.
Peregrine's share of Stenham's earnings (excluding the effects of the intangible impairment
in the prior year) increased by 13% to R96 million (2013: R85 million).
Stenham Asset Management continued to experience challenging trading conditions. Net
outflows of $320 million (which moderated over the course of the year), balanced by stronger
investment performance, left total assets under management at year end at $2.0 billion (2013:
$2.1 billion). Due to improved investment performance during the year, significant
performance fees were earned.
Stenham Property delivered a lower trading performance relative to the previous year,
notwithstanding an improvement in the valuation of several properties which it manages.
Property assets under management as at the end of the year, the majority of which assets are
located in the UK and Germany, amounted to £1.6 billion (2013: £1.7 billion).
Stenham Trustees continues to perform well and is increasingly becoming a more significant
contributor to Stenham Group profits. Post year end Stenham Trustees concluded an
acquisition which will further augment its operations and client base.
Stenham remains strongly cash-flow generative, with no long-term debt and cash available to
augment future growth.
Broking and Structuring
The positioning of Peregrine Securities as one of the few substantial, independent structuring
and broking entities in South Africa enabled the business to perform exceptionally this year.
It has built several of the industry's leading franchises in the areas of prime broking and
derivative broking and structuring, which have benefited from increased financial market
trading volumes. Peregrine Securities increased its contribution by 45% to R84 million
(2013: R58 million) for the year.
Proprietary Investments
Off a lower base, primarily as a result of the distribution of hedge fund assets to shareholders
via a special dividend, group investments achieved income of R99 million (2013: R118
million).
Issued share capital
As a result of the vesting of the second tranche of shares relating to the share scheme which
was implemented during 2010 (comprising an executive incentive scheme and a junior share
option scheme with shares vesting in three equal tranches in November 2012, 2013 and
2014), 6 209 850 new Peregrine shares were allotted and issued at a price of R7.37 per share.
Following the issue of such shares the group's issued shares, net of treasury shares of
20 484 314, amounted to 192 516 423.
The third tranche of shares, due to vest on 15 November 2014, will be issued at a price of
R7.37 per share.
Following the extension of the executive incentive scheme implemented last year, in terms of
which a maximum of 2,561 million shares will be allotted and issued and which shares vest
on 15 November 2015, no further extension to the executive incentive scheme has been
implemented.
Dividend
The directors have resolved to declare an ordinary gross dividend of 100 cents per share for the
year ended 31 March 2014. This represents growth of 39% over last year's ordinary dividend
of 72 cents per share. The directors have decided against declaring a special cash dividend
this year, earmarking the capital for organic growth and further acquisitions.
The salient dates applicable to the ordinary dividend:
Last date to trade cum dividend Friday, 1 August 2014
Trading ex dividend commences Monday, 4 August 2014
Record date Friday, 8 August 2014
Payment date Monday, 11 August 2014
In terms of the Listings Requirements of the JSE the following additional information is disclosed:
1. The ordinary cash dividend has been declared out of income reserves;
2. The local dividend tax rate is 15%;
3. There are no secondary tax on companies credits available to be utilised against the ordinary dividend;
4. The gross local dividend amount for the ordinary cash dividend is 100 cents per share for
shareholders exempt from paying dividends tax;
5. The net local dividend amount for the ordinary cash dividend is 85 cents per share for
shareholders liable to pay dividends tax;
6. The issued share capital of Peregrine is 213 000 737 shares of 0.1 cent each; and
7. Peregrine’s tax reference number is 9181924847.
Shares may not be materialised or rematerialised between Monday, 4 August 2014 and
Friday, 8 August 2014, both dates inclusive.
Directorate
Jonathan Hertz was appointed as the group's Chief Executive Officer with effect from 1 April
2013 (which appointment was confirmed at the annual general meeting held on 25 October
2013).
At such annual general meeting:
- Nomfanelo Magwentshu and Lungile Ndlovu retired from office and did not offer
themselves for re-election; and
- Stefaan Sithole was appointed as an independent non-executive director (as well as a
member of the Audit Committee and Chairman of the Social and Ethics Committee).
Advocate Leonard Harris stepped down as Chairman of the board with effect from 1 April
2014 and was replaced by Sean Melnick. Leonard will remain on as lead independent non-
executive director. The board thanks Leonard for his significant contribution to the group as
Chairman over the past five years.
Conclusion
In line with the new strategy adopted, Peregrine has capitalised on the strong base of
profitable, cash generative operating businesses as is evident with the release of these results.
In addition the group continues to focus on growing its businesses organically, driving cross
business revenue synergies and continuing the process of divesting from non-core assets. At
the same time the group is diversifying and expanding through appropriate transactions.
Jonathan Hertz Sean Melnick
Group CEO Non-executive Chairman
Sandton
11 June 2014
Directors: SA Melnick^ (Chairman); J Hertz (CEO); RE Katz (CFO); BC Beaver*;
P Goetsch^; LN Harris# S Sithole*; SI Stein*; M Yachad ^ Non-executive *Independent
non-executive #Lead independent non-executive
Company secretary and registered office: Peregrine Management Services Proprietary
Limited, 6A Sandown Valley Crescent, Sandown, Sandton, 2196 (PO Box 650361, Benmore,
2010), Telephone: +27 11 722 7400 Fax: +27 11 722 7410
Transfer Secretaries: Computershare Investor Services Proprietary Limited, 70 Marshall
Street, Johannesburg, 2001, (PO Box 61051, Marshalltown, 2107)
Sponsor: Java Capital
Further detail and a print-friendly version of these results will be available from the
company's website at www.peregrine.co.za on Thursday, 12 June 2014.
Condensed consolidated income statement
% change
2013 to
2014 Reviewed Audited
2014 2013
R'000 R'000
Operating revenue 19 2 015 499 1 690 333
Investment income >100 101 419 46 972
Total revenue 22 2 116 918 1 737 305
Fair value gain on linked financial investments 725 856 580 690
Fair value loss on policyholder contract liabilities (725 856) (580 690)
Operating expenses 10 (1 454 762) (1 317 847)
Profit from operations 58 662 156 419 458
Net interest received 13 53 045 47 050
Interest received 55 201 47 543
Interest paid (2 156) (493)
Share of profits from equity accounted investees (29) 40 727 57 395
Profit before intangibles impairment 44 755 928 523 903
Intangibles impairment - (892 820)
Profit/(loss) before taxation and capital items 755 928 (368 917)
Gain on disposal of interest in subsidiary 5 139 -
Profit/(loss) before taxation 761 067 (368 917)
Taxation (156 797) (92 595)
Profit/(loss) for the year >100 604 270 (461 512)
Profit/(loss) for the year attributable to:
Equity holders of the company >100 425 023 (466 669)
Non-controlling interests >100 179 247 5 157
>100 604 270 (461 512)
Consolidated statement of other comprehensive income
Profit/(loss) for the year 604 270 (461 512)
Other comprehensive income for the year net of taxation
Items that may be reclassified subsequently to profit or loss:
Currency translation differences 249 758 286 102
854 028 (175 410)
Other comprehensive income for the year attributable to:
Equity holders of the company 175 154 233 789
Non-controlling interests 74 604 52 313
249 758 286 102
Total comprehensive income/(loss) for the year attributable to:
Equity holders of the company 600 177 (232 880)
Non-controlling interests 253 851 57 470
854 028 (175 410)
Basic earnings/(loss) per ordinary share (cents) >100 214.1 (226.4)
Diluted earnings/(loss) per ordinary share (cents) >100 205.5 (222.7)
Number of ordinary shares in issue ('000) 213 001 206 791
Treasury shares held ('000) 20 484 10 484
Weighted average number of ordinary shares in issue ('000) 193 305 206 099
Diluted weighted average number of shares in issue ('000) 201 409 209 588
Reconciliation between earnings and headline earnings
%
change
2013 to Reviewed Audited
2014 2014 2013
R'000 R'000
Profit/(loss) for the year attributable to equity holders >100 425 023 (466 669)
Adjustments relating to earnings attributable to participating treasury shares (11 155) -
Profit attributable to ordinary shareholders 413 868 (466 669)
Adjustments: ¹
Gain on disposal of interest in subsidiary (5 004) -
Impairment to intangible assets - 892 820
Non-controlling interest effect on impairment to intangible assets - (139 780)
Headline earnings 43 408 864 286 371
Headline earnings per ordinary share (cents) 52 211.5 138.9
Diluted headline earnings per ordinary share (cents) 49 203.0 136.6
Cash dividend paid per ordinary share in respect of the previous year (cents) >100 72.0 35.0
Cash dividend per ordinary share declared subsequent to 31 March (cents) 39 100.0 72.0
Special cash dividend per ordinary share declared subsequent to 31 March (cents) - 28.0
¹ - None of the adjustments had an effect on tax
Condensed consolidated statement of financial position
Reviewed Audited
2014 2013
R'000 R'000
Assets
Non-current assets 6 298 451 5 790 092
Property, plant and equipment 33 710 35 750
Intangible assets 629 707 545 796
Investment in equity accounted investees 70 796 101 945
Investments linked to policyholder investment contracts 5 124 941 4 728 289
Financial investments 351 067 306 889
Loans and receivables - 1 987
Deferred taxation 88 230 69 436
Current assets 15 221 591 12 867 002
Financial investments 1 238 995 2 588 026
Loans and receivables 43 726 310 897
Trade and other receivables 604 968 697 215
Amounts receivable in respect of stockbroking activities 11 492 130 8 291 269
Taxation 5 628 4 111
Cash and cash equivalents 1 836 144 975 484
Total assets 21 520 042 18 657 094
Equity and liabilities
Equity 2 693 403 2 229 742
Equity attributable to holders of the company 2 063 521 1 706 938
Non-controlling interests 629 882 522 804
Non-current liabilities 5 137 156 4 752 244
Policyholder investment contract liabilities 5 124 941 4 728 289
Loans and other payables 5 468 19 014
Deferred taxation 6 747 4 941
Current liabilities 13 689 483 11 675 108
Loans and other payables 79 893 1 593 899
Financial instrument liabilities 720 495 919 662
Trade and other payables 1 117 148 946 330
Amounts payable in respect of stockbroking activities 11 703 824 7 861 260
Taxation 43 874 37 604
Bank overdraft 24 249 316 353
Total equity and liabilities 21 520 042 18 657 094
Net tangible asset value per ordinary share 737.9 628.3
Net asset value per ordinary share 1 018.9 869.5
Condensed consolidated statement of changes in equity
Total capital and Non-controlling
reserves interests Total equity
R'000 R'000 R'000
Reviewed - 2014
Balance at 31 March 2013 1 706 938 522 804 2 229 742
Profit for the year 425 023 179 247 604 270
Other comprehensive income for the year 175 154 74 604 249 758
Transactions with owners recorded directly in equity: (243 594) (146 773) (390 367)
Dividends paid (196 306) (109 329) (305 635)
Share-based payments 26 642 - 26 642
Acquisition of subsidiaries with non-controlling interests - 3 698 3 698
Subscription of shares in a new subsidiary - 47 019 47 019
Contingent consideration received as a result of an agreement to dispose of interest in subsidiary 498 - 498
Purchase of shares in subsidiary from the non-controlling shareholders (24 587) (69 965) (94 552)
Disposal of shares in subsidiary to non-controlling interest shareholder 2 448 (2 389) 59
Reversal of put option cost arising on buy-back and subsequent cancellation of put option shares 8 271 7 408 15 679
Repurchase and cancellation of shares of a subsidiary (413) (23 215) (23 628)
Acquisition of treasury shares (107 070) - (107 070)
Issue of additional shares of holding company 46 923 - 46 923
Balance at 31 March 2014 2 063 521 629 882 2 693 403
Audited - 2013
Balance at 31 March 2012 2 184 309 594 419 2 778 728
(Loss)/profit for the year (466 669) 5 157 (461 512)
Other comprehensive income for the year 233 789 52 313 286 102
Transactions with owners recorded directly in equity: (244 491) (129 085) (373 576)
Dividends paid (216 177) (232 116) (448 293)
Share-based payments 19 011 - 19 011
Subscription of shares in a new subsidiary - 595 595
Contingent consideration received as a result of the disposal of interest in subsidiary (51 166) 60 655 9 489
Purchase of shares in subsidiary from the non-controlling shareholder 9 559 (20 346) (10 787)
Disposal of 20% of Peregrine SA Holdings to Nala 236 600 143 400 380 000
Repurchase and cancellation of shares of a subsidiary - (85 006) (85 006)
Non-controlling interest share of capital contribution made to subsidiary (3 733) 3 733 -
Issue of additional shares of holding company 55 409 - 55 409
Repurchase and cancellation of shares of holding company (294 701) - (294 701)
Acquisition of treasury shares (242) - (242)
Disposal of treasury shares 949 - 949
Balance at 31 March 2013 1 706 938 522 804 2 229 742
Condensed consolidated cash flow statement
Reviewed Audited
2014 2013
R'000 R'000
Cash flow from operating activities 1 106 241 (158 134)
Cash flow from operating activities excluding stockbroking activities 764 257 594 838
Cash dividends paid (299 719) (283 229)
Cash flow from/(to) stockbroking activities 641 703 (469 743)
Cash flow from investing activities (744 850) (378 460)
Cash flow from financing activities 698 189 336 877
Net increase/(decrease) in cash and cash equivalents 1 059 580 (199 717)
Cash and cash equivalents at beginning of the year 659 131 799 045
Effects of exchange rate changes on cash and cash equivalents 93 184 59 803
Cash and cash equivalents at end of the year 1 811 895 659 131
Segmental analysis
% change in pro forma
Pro forma profit from profit from ordinary
ordinary activities activities before
before intangible intangible impairment
impairment and and amortisation and
Revenue and Interest and amortisation and share- share-based payment
investment equity accounted Profit/(loss) from based payment cost cost adjusted for
income income ordinary activities ¹ adjusted for minorities minorities
R'000 R'000 R'000 R'000 2013 to 2014
Reviewed - 2014
Wealth and Asset Management 864 361 32 302 353 822 279 718 54
Wealth Management - local 707 778 20 539 273 200 240 449 81
Wealth Management - offshore (4 403) 1 (21 094) (21 094) 21
Asset Management 160 986 11 762 101 716 60 363 -20
Broking and Structuring 560 723 17 598 148 112 83 768 45
Stenham 529 463 18 281 132 240 95 609 13
Total from operating reportable segments 1 954 547 68 181 634 174 459 095 41
Group 109 633 27 586 66 749 65 832 -4
Operations 962 21 890 (41 727) (33 225) 0
Investment returns 108 671 6 035 108 815 99 396 -15
Cost of funding (339) (339) (339) -98
2 064 180 95 767 700 923 524 927 34
Audited - 2013
Wealth and Asset Management 678 127 36 562 243 896 182 146
Wealth Management - local 493 446 23 777 136 039 133 126
Wealth Management - offshore 1 933 3 (15 455) (26 733)
Asset Management 182 748 12 782 123 312 75 753
Broking and Structuring 385 303 21 142 95 037 57 884
Stenham ² 538 580 30 817 (188 565) 84 872
Total from operating reportable segments 1 602 010 88 521 150 368 324 902
Group 121 048 15 924 (519 285) 68 246
Operations 2 377 17 791 (633 022) (33 174)
Investment returns 118 671 13 790 129 939 117 622
Cost of funding (15 657) (16 202) (16 202)
1 723 058 104 445 (368 917) 393 148
Note: Group funding costs are disclosed as part of "group" and have not been allocated to the appropriate underlying entities.
¹ Profit/(loss) from ordinary activities is synonymous with profit/(loss) before taxation and capital items.
² There were significant changes to the assets of Stenham following on the impairment of intangibles for the year ended 31 March 2013. As at 31 March 2013 Stenham's
total assets amounted to R1.1 billion (2012: R1.7 billion) and total liabilities amounted to R193 million (2012: R205 million).
Reconciliation of segmental analysis to income statement
Total from
Wealth and operating
Asset Broking and reportable Non-reportable
Management Structuring Stenham segments Group segments ¹ Total
R'000 R'000 R'000 R'000 R'000 R'000 R'000
For the year ended 31 March 2014
Revenue and investment income per segmental analysis 864 361 560 723 529 463 1 954 547 109 633 - 2 064 180
Reconciling items: (43 693) 79 315 - 35 622 (89 879) 106 995 52 738
Operating revenue - internal (42 352) 82 193 - 39 841 - 39 841
Operating revenue of non-reportable segment - external - - - - - 14 405 14 405
Investment income - internal (1 341) (2 878) - (4 219) (89 879) 94 098 -
Investment income of non-reportable segment - external - - - - (1 508) (1 508)
Revenue and investment income per income statement 820 668 640 038 529 463 1 990 169 19 754 106 995 2 116 918
Profit before taxation and capital items per segmental analysis 353 822 148 112 132 240 634 174 66 749 - 700 923
Reconciling revenue and investment income items (43 693) 79 315 - 35 622 (89 879) 106 995 52 738
Operating expenses of non-reportable segment - external - - - - - (40 235) (40 235)
Deferred profit participation ² 60 539 - - 60 539 - - 60 539
Share-based payment charge ² (16 042) - - (16 042) - - (16 042)
Interest paid - internal - 3 050 - 3 050 - - 3 050
Interest received - external - - - - (2) 51 49
Income from associate companies - internal - - (5 094) (5 094) - - (5 094)
Profit before taxation and capital items per income statement 354 626 230 477 127 146 712 249 (23 132) 66 811 755 928
For the year ended 31 March 2013
Revenue and investment income per segmental analysis 678 127 385 303 538 580 1 602 010 121 048 - 1 723 058
Reconciling items: (20 827) 124 984 - 104 157 (78 088) (11 822) 14 247
Operating revenue - internal (20 827) 130 851 - 110 024 - - 110 024
Investment income - internal - (5 867) - (5 867) (78 088) 83 955 -
Investment income of non-reportable segment - external - - - - - (95 777) (95 777)
Revenue and investment income per income statement 657 300 510 287 538 580 1 706 167 42 960 (11 822) 1 737 305
Profit before taxation and capital items per segmental analysis 243 896 95 037 (188 565) 150 368 (519 285) - (368 917)
Reconciling revenue and investment income items (20 827) 124 984 - 104 157 (78 088) (11 822) 14 247
Operating expenses of non-reportable segment - external - - - - - (14 247) (14 247)
Interest received - internal - - - - - - -
Profit before taxation and capital items per income statement 223 069 220 021 (188 565) 254 525 (597 373) (26 069) (368 917)
¹ - Refers to the group's consolidated proprietary hedge and property fund investments which do not meet the quantitative thresholds for determining reportable segments.
² - Management treats the deferred profit scheme (which is settled in PGR shares) as an expense as profits are earned, but for IFRS purposes, it is a share-based payment
arrangement, in which the grant date fair value is recognised over the vesting period.
Analysis of assets and liabilities by financial instrument classification
Non-financial
instruments and
Financial instruments at fair value Loans and receivables Financial liabilities Fair value of financial
financial instruments Total
through profit or loss at amortised cost at amortised cost instrument
beyond the scope of
IFRS 7
Designated at
Held-for-trading
Inception
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Reviewed as at 31 March 2014
Non-current assets - 5 476 008 - - 822 443 6 298 451 5 476 008
Property, plant and equipment - - - - 33 710 33 710 -
Intangible assets - - - - 629 707 629 707 -
Investment in equity accounted investees - - - - 70 796 70 796 -
Investments linked to policyholder investment contracts - 5 124 941 - - - 5 124 941 5 124 941
Financial investments - 351 067 - - - 351 067 351 067
Loans and receivables - - - - - -
Deferred taxation - - - - 88 230 88 230 -
Current assets 8 838 524 738 752 5 619 379 - 24 936 15 221 591 12 731 125
Financial investments 293 358 738 752 2 06 885 - - 1 238 995 1 238 995
Loans and receivables - - 43 726 - - 43 726 -
Trade and other receivables - - 585 660 - 19 308 604 968 -
Amounts receivable in respect of stockbroking activities 8 545 166 - 2 946 964 - - 11 492 130 11 492 130
Taxation - - - - 5 628 5 628 -
Cash and cash equivalents - - 1 836 144 - - 1 836 144 -
Total assets 8 838 524 6 214 760 5 619 379 - 847 379 21 520 042 18 207 133
Non-current liabilities - 5 113 668 - - 23 488 5 137 156 5 113 668
Policyholder investment contract liabilities - 5 113 668 - - 11 273 5 124 941 5 113 668
Loans and payables - - - - 5 468 5 468 -
Deferred taxation - - - - 6 747 6 747 -
Current liabilities 9 645 954 543 509 - 3 131 141 368 879 13 689 483 12 424 319
Loans and payables - - - 79 893 - 79 893 -
Financial instrument liabilities 176 986 543 509 - - - 720 495 720 495
Trade and other payables - - - 792 143 325 005 1 117 148 -
Amounts payable in respect of stockbroking activities 9 468 968 - - 2 234 856 - 11 703 824 11 703 824
Taxation - - - - 43 874 43 874 -
Bank overdraft - - - 24 249 24 249 -
Total liabilities 9 645 954 5 657 177 - 3 131 141 392 367 18 826 639 17 537 987
Fair value information has not been provided for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
Fair value hierarchy
The fair value of a financial instrument is the price that would be received for the sale of an asset or paid for the transfer of a liability in an orderly transaction between market
participants at the measurement date. Underlying the definition of fair value is a presumption that an entity is a going concern without any intention or need to liquidate, to curtail
materially the scale of its operations or to undertake a transaction on adverse terms. Fair value is not, therefore, the amount that an entity would receive or pay in a forced transaction,
involuntary liquidation or distressed sale.
The fair values of financial instruments traded in active markets is based on unadjusted quoted market prices at reporting date. A market is regarded as active if quoted prices for
identical assets or liabilities are readily available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and
regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the group is the bid price. These instruments are included
in level 1.
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques maximise the use of observable
data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value the instrument are observable, the instruments are
included in level 2.
If one or more significant inputs are not based on observable market data, the instrument is included in level 3.
Specific valuation techniques used to value financial instruments include:
- Quoted market prices or dealer quotes for similar instruments;
- The fair value of the unlisted property fund investments classified as level 2 are based on recognised quoted prices for a monthly trading asset. The fair value of the unlisted property
fund investments classified as level 3 are based on internal and external professional advice in respect of the underlying property values (market value benchmarking);
- Payables in respect of put options, settled during the year, were classified as level 3 as at 31 March 2013 and were based on internal assessments of the value of the Asset
Management division within Stenham Asset Management Proprietary Limited and an assessment of the non-controlling interest discount on that value, and
- Other techniques such as discounted cash flow analysis are used to determine the fair value of the remaining financial instruments.
The following table presents the group's assets and liabilities that are measured at fair value as at 31 March 2014:
Reviewed 2014
Level 1 Level 2 Level 3 Total
R'000 R'000 R'000 R'000
Financial assets at fair value though profit or loss
Held-for-trading: 8 838 524 - - 8 838 524
Amounts receivable in respect of stock broking activities: Equities 8 545 166 - - 8 545 166
Equities and bonds held by Hedge funds 293 358 - - 293 358
Designated at inception: 788 467 5 305 932 120 361 6 214 760
Unit trusts 25 169 2 - 25 171
Variable rate debenture - 5 273 - 5 273
Investments linked to policyholder investment contracts - 5 124 941 - 5 124 941
Share portfolio investments - unlisted - 277 - 277
Private equity investments – listed 21 751 - 21 751
Private equity investments – unlisted - 23 283 2 103 25 386
Property fund investments - listed 95 891 95 294 - 191 185
Property fund investments - unlisted - - 118 258 118 258
Hedge fund investments - unlisted - 56 862 - 56 862
Equities and bonds held by Hedge Funds 645 656 - - 645 656
Total financial assets carried at fair value 9 626 991 5 305 932 120 361 15 053 284
Financial liabilities at fair value though profit or loss
Held-for-trading: (9 645 954) - - (9 645 954)
Amounts payable in respect of stockbroking activities: Equities (9 468 968) - - (9 468 968)
Instruments held by Hedge Funds- short equity positions, options and bonds (176 986) - - (176 986)
Designated at inception: (22 405) (5 634 772) - (5 657 177)
Net assets attributable to outside investors in the Hedge Funds - (521 104) - (521 104)
Policyholder investment contract liabilities - (5 113 668) - (5 113 668)
Financial instrument liability (22 405) - - (22 405)
Total financial liabilities carried at fair value (9 668 359) (5 634 772) - (15 303 131)
Transfers between level 1 and level 2:
In the prior year amounts receivable in respect of stockbroking activities of R6.4 billion were classified as a level 2 asset in the fair value hierarchy. The equity positions that
underpinned this amount were primarily level 2 type equities. These positions were realised during the year. The equity positions underpinning the amounts receivable in respect of
stockbroking activities as at 31 March 2014 of R8.5 billion consist only of level 1 type equities and as a result have been classified as such as at 31 March 2014.
In the prior year amounts payable in respect of stockbroking activities of R6.1 billion were classified as a level 2 liability in the fair value hierarchy. The instruments that underpinned this
amount were primarily level 2 type instruments. The prior year liability was realised during the year. The instruments underpinning the amounts payable in respect of stockbroking
activities as at 31 March 2014 of R9.5 billion consist only of level 1 type instruments and as a result have been classified as such as at 31 March 2014.
Level 3 reconciliations per class:
Reviewed 2014
Financial instruments at fair value through profit or loss:
Private equity investments – unlisted
Designated at inception
Assets Liabilities
R'000 R'000
Opening balance 1 835 -
Total gains/ (losses) recognised in:
Profit or loss (189) -
Investment and other income (unrealised) (189) -
Finance costs - -
Other comprehensive income: Currency translation differences 457 -
Purchases - -
Issues - -
Settlements - -
Disposals
Transfer from level 2 into level 3 - -
Closing balance 2 103 -
Financial instruments at fair value through profit or loss:
Property fund investments - unlisted
Designated at inception
Assets Liabilities
R'000 R'000
Opening balance 127 713 (16 716)
Total gains/ (losses) recognised in:
Profit or loss (1 327) 2 218
Investment and other income (unrealised) (1 327) 2 218
Finance costs - -
Other comprehensive income: Currency translation differences 29 542 (2 604)
Purchases 6 732 -
Issues - -
Settlements - 17 102
Disposals (44 402) -
Transfer from level 2 into level 3 - -
Closing balance 118 258 -
At 31 March 2014 a change of one or more of the inputs used in the fair value measurement calculation of the level 3 instruments did not result in a significant change to the fair values
of these instruments.
Notes and Compliance
The condensed consolidated preliminary financial statements of the Peregrine group as at and for the year ended 31 March 2014 comprise the company and its subsidiaries ("the
group") results and the group's interests in equity accounted investees.
Basis of preparation
The condensed consolidated preliminary financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports and the
requirements of the Companies Act of South Africa. The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts and
the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council and to also, as a minimum, contain the information
required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the condensed consolidated financial statements are in terms of IFRS
and are consistent with those applied in the previous consolidated annual financial statements, except for those discussed below.
The preparation of these condensed consolidated preliminary financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires
management to exercise judgement in the process of applying the group's accounting policies. The significant judgements made by management in applying the group's
accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31
March 2013, except for those discussed under Accounting policies below.
The preparation of the group's results have been under the supervision of R E Katz CA (SA), the Group Chief Financial Officer.
The prior year audited results are a summary of the consolidated annual financial statements as at and for the year ended 31 March 2013, which were prepared under the
supervision of RE Katz CA (SA), the Group Chief Financial Officer. A copy of these financial statements can be obtained from the issuer's registered office.
Review report
These condensed consolidated financial statements for the year ended 31 March 2014 have been reviewed by KPMG Inc., who expressed an unmodified review conclusion.
A copy of the auditor's review report is available for inspection at the company's registered office together with the financial statements identified in the auditor's report.
The auditor's report does not necessarily report on all of the information contained in the condensed consolidated preliminary financial statements. Shareholders are
therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement they should obtain a copy of the auditor's report together
with the accompanying financial information from the issuer's registered office. The directors take responsibility for the preparation of this preliminary report and that
the financial information has been correctly extracted from the underlying financial statements.
Accounting policies
The following standards in particular have been newly adopted or amended with effect from 1 January 2013 and applied by the group for the first time in the year
ended 31 March 2014:
1. IFRS 10: Consolidated Financial Statements and IAS 28: Investments in Associates.
As a result of adopting IFRS 10 the group has changed its accounting policy with respect to determining whether it has control over and consequently whether it is required to
consolidate an investee. IFRS 10 introduces a new set of criteria for assessing control by referring to the investor's exposure or rights to variable returns from its involvement
with the investee and the ability to affect those returns through its power over the investee.
The group reassessed the control conclusion for its investees at 1 April 2013. As a consequence, the group has changed its control conclusion in respect of its investment in
Stenham Real Estate Equity Fund Limited ("SREEF"), which is not significant in relation to the group and has been consolidated from 1 April 2013.
On 1 April 2013, the Peregrine High Growth Fund en Commandite Partnership ("The Fund") was restructured. The group assessed its interest in The Fund in terms of IFRS
10 at this date. The group has a 29% aggregate economic interest in The Fund together with low/weak kick-out rights and as a consequence is considered, in terms of IFRS
10, to be acting as a principal and therefore The Fund is required to be consolidated.
2. IFRS 11: Joint arrangements
Under IFRS 11, the structure of the joint arrangement, although still an important consideration, is no longer the major factor in determining the type of joint arrangement and
therefore the subsequent accounting.
The group's interest in a joint operation, which is an arrangement in which the parties have rights to the assets and obligations for the liabilities, will be accounted for on the
basis of the group's interest in those assets and liabilities.
The group's interest in a joint venture which is an arrangement in which the parties have rights to the net assets, will be equity accounted, which is consistent with the
accounting treatment thereof in the prior year.
3. IFRS 13: Fair Value Measurement
IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted
by other IFRSs. IFRS 13 also provides for a revised definition of fair value - being the price at which an orderly transaction to sell an asset or transfer a liability would take
place between market participants at the measurement date. It also replaces and expands the disclosure requirements about fair value measurements of other IFRSs,
including IFRS 7: Financial Instruments - Disclosures. Some of these disclosures are specifically required in these financial statements for financial instruments; accordingly,
the group has included additional disclosures in this regard (refer heading Fair value hierarchy).
In accordance with the transitional provisions of IFRS 13, the group has applied the new fair value measurement guidance prospectively, and has not provided any
comparative information for the new disclosures. Notwithstanding the above, the change had no significant impact on the measurement of the group's assets and liabilities.
4. Presentation of items of other comprehensive income (Amendment to IAS 1: Presentation of financial statements)
As a result of the amendments to IAS 1, the group has modified the presentation of items of other comprehensive income in its condensed consolidated statement of
comprehensive income, to present separately items that would be reclassified to profit or loss in the future from those that would never be. Comparative information has also
been represented accordingly.
The adoption of the amendment to IAS 1 has no impact on the recognised assets, liabilities and comprehensive income of the group.
Acquisitions
1. Following the additional 20% shareholding that Citadel acquired in Wealthcorp effective 1 October 2013 at a cost of R15 million, thereby increasing its stake to 70%,
Wealthcorp ceased to be an associate and is now accounted for as a subsidiary of Citadel.
The acquisition had the following effect on the group's assets and liabilities. The fair values reflected below represent their carrying values at the date of acquisition and
therefore no fair value adjustments were recognised on acquisition.
R'000
Assets 12 853
Equipment 339
Deferred taxation 160
Trade and other receivables 875
Cash and cash equivalents 11 479
Liabilities (4 231)
Taxation payable (769)
Trade and other payables (3 462)
Fair value of identifiable net assets assumed 8 622
Intangibles arising on acquisition 28 070
Non-controlling interest (2 587)
Associate becoming a subsidiary (19 305)
Cash consideration 14 800
Less: Cash and cash equivalents assumed (11 479)
3 321
2. Peregrine SA Holdings acquired a 65% shareholding in Bayhill Capital (previously Cannon Asset Managers), a locally based deep value asset management business, in
December 2013 for a cash consideration of R9.5 million (with management having an option, until 31 December 2016, to purchase a further 5% for R1 million).
3. On the 25 October 2013, Peregrine acquired a 6.71% interest from the non-controlling shareholders of Stenham at a purchase price of £40.00 per share (total purchase
price £2.27 million (R42 million)). Subsequent to this acquisition, and as a result of a repurchase and cancellation of its own shares in two tranches during the course of the
current year, the shareholding in Stenham increased from 62.71% to 70.78%.
Disposals
1. Peregrine Securities, through Financial Products, disposed of its 40% interest in Southchester Holdings effective 31 March 2014. Although Peregrine Securities only had a
40% shareholding, the entity was required to be consolidated in terms of IFRS 10 up to 31 March 2014.
2. Peregrine International Holdings disposed of its 100% interest in the ordinary shares of Beauclerc Limited effective 1 March 2014.
Events subsequent to reporting period
1. On 1 April 2014, Citadel acquired an additional 45 ordinary shares in Wealthcorp, which comprises 30% of its issued share capital, for a total consideration of R24
million thereby increasing its shareholding in Wealthcorp to 100%.
2. Subject to signature of formal agreements and certain regulatory approvals, Stenham Trustees will purchase the entire issued share capital of Cannon AM (a trust and fiduciary company)
for a purchase consideration of between £1 million and £3 million with any increase in the minimum purchase price above £1 million being subject to the audited profit after
tax of Cannon AM for the period from 1 April 2014 to 31 March 2015. The minimum purchase consideration is payable once the conditions have been
fulfilled with any increase payable once the audited financial statements for the year ending 31 March 2015 have been finalised. The sellers will retain management control of
Cannon AM during this earn out period.
Contingent liabilities
Contingent liabilities as at 31 March 2014 amounted to R15.8 million (2013: R14.2 million).
Commitments
Operating lease and capital commitments as at 31 March 2014 amounted to R253 million (2013: R254 million).
Applicable exchange rates
Average rates Closing rates
USD:ZAR
31 March 2014 10.11 10.52
31 March 2013 8.50 9.17
GBP:ZAR
31 March 2014 16.10 17.53
31 March 2013 13.44 13.93
Date: 11/06/2014 11:49:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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